What We Can Learn from Circuit City

With the announcement today that Circuit City has been unable to find a buyer and is therefore going to be forced to close its remaining stores, lost in their demise could be one of social media’s more significant lessons.  E-commerce is a sufficiently small piece of their business that no amount of success as an e-tailer would compensate for their shortcomings as a retailer in this gruesome economy, but don’t throw out the baby with the bathwater.

Circuit City was one of the early retailers to make what at the time was a highly controversial decision.  These retailers make big bets on inventory, stocking large volumes of products that they think are going to be successful and even going so far as to strike preferential deals with manufacturers to secure allotments of hot products.  Given these bets, you would imagine that it would be highly controversial to open up their corridors to dissenting opinions.  However, Circuit City was one of the relatively early brick-and-mortar retailers to host user opinions.

And what did Circuit City discover?  They found that people who read user opinions on their site were 2-5x more likely to purchase than those who didn’t read the user opinions.  Of course, this is a complicated equation that raises all sorts of cause-and-effect questions.  It isn’t a simple matter of getting people to read user opinions.  Those who read such opinions are probably already more inclined to purchase.  Whatever the relationship, however, Circuit City experimented with and capitalized upon the power of their user community to their benefit.

No, it wasn’t enough to save the chain but in these tough times, when retailers are questioning whether the hassle of user-generated content is worth the outcomes, it’s worth remembering the outcomes Circuit City produced.  Those would put their heads in the sand, pretending that if they don’t support engagement with their users and  buyers that it somehow doesn’t exist, are only kidding themselves.  If we all haven’t figured out the ultimate power of social networking and how to harness it in the advertising and selling cycle, early pioneers have already demonstrated that there are tangible returns to be achieved.  Let this perhaps be Circuit City’s lasting legacy.

What is a “Media Company” Anyhow?

With all the discussion of Yahoo’s next CEO, the question has arisen:  is Yahoo a technology company?  A media company?  Both?  Is there a distinction?

I’m still not sure I buy into this distinction.  The modern media powerhouse has to have its fingers deep into technology.  Perhaps there’s an argument to be made about the need to own technology vs. being an aggressive exploiter of the technology but I think this artificial distinction has gotten many companies, Yahoo included, into trouble.  Terry Semel tried turning Yahoo into a media company and by turning his back on a lot of the technology Yahoo had in development or practice, started Yahoo’s diastrous path to this point.

I think media companies can survive without owning technology but they’d better have a deep understanding of its capabilities and how that technology is changing the relationship between advertiser, media outlet and consumer.  I’m wrestling with taking this argument a step further and making the argument that the leading media powerhouses of this next era must own key technologies, that they are sources of key differentiation and enable greater control of the monetization process.  I’m not prepared to make the assertion now but I do believe that’s where we’re headed.  Note that I am not positing that all major media companies must also be technology companies but I think the long-term biggest winners combine the two (or more).

I know this sounds like AOL TW, and that gives me pause…but we’ve seen lots of combinations over the years that were wrong at the time not because the idea was fundamentally flawed but that the timing was disastrously off.

New Yahoo CEO?

UPDATE:  The story has been confirmed, and I got mention in the USAToday story.

Strong indications are that ex-Autodesk CEO Carol Bartz is going to be named Yahoo’s next CEO.  I find this an interesting choice, along these lines.  To get someone of this stature (appropriate or not; more below) probably required a commitment to let her come in and make a (quick) determination about whether to double down on search or finallly sell to Microsoft.  She’s a good candidate in either scenario, which is not true of many of the other names that have surfaced.  If they decide that search remains an opportunity for them, she’s got great technical chops.  If on the other hand a deal is to be made with Microsoft, she has a long history of “co-opetition” with Microsoft, and is a well-respected commodity there, particularly with Ballmer.
Whoever ends up in charge, if they don’t come out punching with a cohesive story about how not only Yahoo doesn’t get enough credit for what it has done, what it’s still doing and, critically, what it’s going to do, they’ll be trying to roll the boulder uphill, and that’s not a sustainable communications position.  That said, the challenge here has always been “what are they going to do.”  Lots of interesting things at a micro level which have never come together as a coherent, integrated strategy when viewed from the top.  Is Bartz the person to pull that together?  I’m hard pressed to find another candidate who has her combination of Yahoo familiarity (at least with executives), Microsoft relationships and technical chops.  Yeah, the lack of media/advertising background is glaring, but that was the case with Schmidt too.
I’m frankly surprised they were able to come up with such a strong candidate.  I thought to get someone this strong, they were going to have to resolve the Microsoft search deal.